Multiple financial investors have shown interest in beauty chain CJ Olive Young’s pre-initial public offering (IPO), after the company decided to expand the pool of potential buyers to both domestic and global bidders.
Joint deal managers Credit Suisse and Shinhan Investment received letters of intent from potential buyers on Thursday (October 15), industry sources said. Global private equity (PE) firm TPG and domestic PE firms including Hahn & Company, IMM PE, STIC Investment and JKL Partners have participated in the preliminary round of bidding.
CJ Olive Young originally planned to adopt a limited competitive bidding approach for the pre-IPO, but later broadened the pool of potential buyers as it was worried there might be a tepid response. Some market insiders said this has allowed the seller to receive non-binding offers from a relatively diverse range of financial investors.
“The deal was initially expected to be a race among global managers, but the mood has recently changed,” said an industry source. “Firms that will be allowed to conduct due diligence are likely to draw keen attention.”
Market insiders are also watching whether CJ Olive Young will let most potential buyers conduct due diligence in a virtual data room or only allow a few genuine bidders to do so. It is expected to select a shortlist of bidders as early as this month.
Owner CJ Group, the South Korean food and entertainment conglomerate, is selling a minority stake in CJ Olive Young, including a 17.97% shareholding held by Lee Sun-ho, the only son and heir apparent of group chairman Lee Jae-hyun, and a 10% stake owned by the chairman’s younger brother Lee Jae-hwan. New shares may also be issued. The IPO process is expected to take place in 2022.
“Multiple investors appear to have expressed their interest in conducting due diligence, given CJ Olive Young’s position in the health and beauty chain industry,” an industry source said. “We need to wait to see if the strong interest in the deal continues until the final decision has been made.”
CJ Olive Young’s market share in the health and beauty chain market is over 50%, with more than 1000 stores in South Korea. CJ Group expects the unit to record sales of approximately 2.07 trillion won ($1.8 billion) in 2020, up 5.4% from last year, while its operating profit is forecast at 109 billion won, an increase of 24% from 2019.
Based on the previous accounting model for leases, CJ Olive Young’s earnings before interest, tax, depreciation and amortization would be expected to amount to 166 billion won in 2020, but CJ Group said this is likely to jump to about 313 billion won if the new standard is applied. (Reporting by Ar-rum Rho)